Dear Reader,
One of the most baffling things that I have found in all of the excitement and interest around Elon Musk’s acquisition of Twitter has been the skepticism around whether or not Musk has the wherewithal to get the deal done.
I’m not referring to the sheer fortitude required to get the deal done or to turn the company around. I’m not talking about whether or not Musk has the time to devote to the deal and to provide leadership and oversight to implement his vision for Twitter.
The “wherewithal” I’m referring to is about the money… the dollars… the greenbacks.
Incredibly, much of the mainstream financial media, business journalists, and market commentators have echoed a stream of trite doubt. This is despite the fact that Musk is worth roughly a quarter of a trillion dollars on any given day.
It seems quite obvious to me that someone with that amount of assets would have no problem paying for the acquisition. As I wrote previously, a personal balance sheet like Musk’s will have no problem raising capital to affect the deal.
Most of the doubters tend to get hung up on things like “his assets aren’t liquid” or “he’d be forced to sell too much of Tesla, which would tank the stock.” I’m just paraphrasing, but that’s the gist of the negativity.
Which is why this is a great case study in how financing gets done in a deal like this. Now that a couple of days have passed, we have a better understanding of how Musk put together the cash necessary to buy out Twitter lock, stock, and barrel.
Musk’s Money
Source: The Wall Street Journal
Aside from Musk’s own $21 billion cash contribution, more than half of the deal is financed from other sources. He was able to corral $13 billion of loans from major banks like Morgan Stanley, Barclays, Bank of America, and Japan-based Mitsubishi UFJ Financial Group (MUFG).
The other $12.5 billion contribution also comes from a string of major banks willing to loan on margin against Musk’s Tesla stock. He is able to use one of his assets – Tesla stock – as collateral against the loan.
And that’s how Musk got it done. $44 billion for Twitter, plus an additional $2.5 billion for transaction fees.
We might be surprised to see so many lenders involved in the deal, but it actually makes a lot of sense. These banks were most likely willing to lend even more than they did.
Musk was able to spread around the access to his deal. All of the banks were lining up to support Musk.
Why? The answer is pretty simple.
If they help out Musk with the acquisition of Twitter, they have a better shot at gaining access to the next round of financing at SpaceX, The Boring Company, Neuralink, future financing for Tesla, or Musk’s next revolutionary tech venture.
If they lend now, at least they have an established relationship, an “in,” for consideration for the next hotly contested financing. If you’re not on the above list, good luck.
And this is beside the fact that Twitter, with the right changes, is worth more than $100 billion. If Musk decides to sell two or three years down the road, he’ll most likely make two or three times his money.
The banks are supporting a deal that is taking place at such an undervalued level that there is, in reality, very little risk. They’ll make a great return through interest payments on their loans and get their original capital back.
And Musk will make $50–$100 billion on a turnaround. While the investment return probably won’t put a smile on his face, what he will have done for society most certainly will.
What a big week it’s been for Elon Musk. I think we’re going to have to declare this, unofficially, “Musk Week” here in The Bleeding Edge.
Today we’ll dig into an exciting development at Tesla, and tomorrow we’ll dig even deeper with The Boring Company.
Speaking at Tesla’s Cyber Rodeo event, Musk unveiled the company’s next major product strategy. Yes, there is even more to come! Tesla will begin producing self-driving vehicles designed specifically to be robotaxis.
These will be brand-new electric vehicles (EVs) purposefully built for a ride-hailing service that do not have pedals or a steering wheel. We don’t yet know what they’ll look like, but we can be sure that they’ll be futuristic looking.
Tesla is optimizing the new EVs to transport passengers around metropolitan areas. The plan is to unveil the vehicles next year, and Musk expects them to go into volume production in 2024.
This announcement dovetails with the great progress Tesla has made on its full self-driving (FSD) software.
Tesla rolled out its latest version of FSD in California earlier this year. And the videos are absolutely remarkable:
Tesla’s FSD Software
Source: YouTube
Tesla’s software now enables door-to-door autonomy. That means the car can get from Point A to Point B without any human intervention whatsoever.
And Tesla plans to roll out this FSD software version across the U.S. by the end of this year. That’s how close it is to enabling widespread, full self-driving cars.
Of course, that is by far the hardest part of delivering a robotaxi service. The self-driving software must be flawless. And Tesla is just about there.
That means the only thing left to do is design and produce the EV. That’s, comparatively, the easy part. Tesla will be able to manufacture an even simpler vehicle than the ones that it is producing today.
After all, there won’t be any pedals or steering wheel, which removes some complexity from the car.
So we can expect Tesla to launch fully self-driving ride-hailing services within the next 12–18 months. That will disrupt the ride-hailing industry, and it will provide a major new revenue stream for Tesla.
In addition, I expect Tesla owners will have the choice to opt their own car into the ride-hailing service. When they aren’t using their car, Tesla owners can have their cars go out and give rides to people. Then Tesla will share a portion of the revenues accordingly.
That’s Tesla’s masterstroke… At that point, Tesla cars will have the ability to pay for themselves.
Imagine being able to “lease” your Tesla out to the Tesla ride-hailing service during the day and have the car earn more than the monthly car lease/loan payment. Cost of ownership could not only be zero, it may even be a net income generator.
That’s why my readers are in a position to benefit as this masterstroke goes into operation… There’s even a better option than simply buying shares of Tesla, which has risen to expensive levels (valuation) given the hype around the company. I share more about a better way to profit right here.
So this is another major milestone for Tesla. And I should point out that Tesla will produce the new purpose-built EVs entirely in Texas. This is another perfect example of the “Great Recalibration” that I’ve been talking about.
Big news from Agility Robotics… As demand for its bipedal robots has increased, the company is doubling its employee workforce.
This is a perfect example of how artificial intelligence (AI) and robotics technology are solving the ongoing labor shortage.
We first profiled Agility Robotics way back in 2019. That’s when the company partnered with Ford to test out robotic package deliveries.
At the time, Agility was a tiny startup. The entire company was valued at just $25 million.
Agility Robotics started to gain momentum during the COVID-19 pandemic. It had a small funding round in October 2020 that valued the company at $50 million. That’s still tiny.
Fast-forward to today, and it’s a different story.
Agility Robotics just completed a $150 million Series B funding round this week. The post-money valuation has not been disclosed, but I’m estimating that it is somewhere between $750 million and $1 billion.
That means the company is as much as 19 times more valuable today than it was 16 months ago.
And here’s why…
Agility’s Robots Are Ready
Source: Tech Crunch
As we can see, Agility’s robots are ready for prime time. They are especially well-suited to working in industrial and warehouse settings. This is one of the areas where the labor shortages are most severe.
And I love that Agility designed these robots to do repetitive work that is tough on our human bodies. As we have seen, this is work that humans really don’t want to do anyway.
What’s more, the robots can interact with humans. For example, human workers can hand the robot a box or package that needs moving, and the robot will do the heavy lifting – literally.
Based on Agility’s aggressive expansion plans, it’s clear that demand for its robots is high. I don’t doubt that warehouses around the country are scrambling to get their hands on this technology.
And think about it – we have followed Agility’s story every step of the way in these pages. We recognized how valuable the technology was. We could see how it would fit into the marketplace.
Now Agility Robotics has come of age. Pretty cool.
We’ll continue to track the company closely from here. I’m sure it’s an attractive acquisition target now.
But I would love to see the company go public. It could be a fantastic investment target at the right valuation…
We’ll wrap up today with a major development at Stripe: The company will begin to process cryptocurrency payments.
This is huge news for crypto.
As regular readers know, Stripe is a blue-chip financial technology (fintech) company. It processes payments for millions of merchants around the world, including giants like Amazon, Google, Instacart, Lyft, Salesforce, Slack, Shopify, Zoom, and many more.
Stripe has such a robust customer base because it takes away all the complexities around processing payments. That means its clients don’t have to worry about anything other than their core business.
So once Stripe turns on cryptocurrency payments, all of its customers will have the option to seamlessly accept crypto as payment as well. That’s why this is such a big deal.
Stripe is starting by doing some pilot launches with a handful of companies… And Twitter is one of the first companies in the pilot.
Stripe’s tech will allow Twitter to pay creators on the platform in crypto. This is an incentive designed to increase Twitter’s stickiness.
It seems ironic that this news is coming out now, just as Musk is set to acquire Twitter. Could it be that this was part of the grand plan all along?
Regardless, I’m excited to see how the pilots go.
To start with, Stripe will only enable U.S. Dollar Coin (USDC) payments. USDC is a stable coin backed one-to-one with U.S. dollars. That means there is no volatility in the price – which makes it a perfect digital currency to launch with.
However, once the core infrastructure is in place, Stripe could turn on payments for any other cryptocurrency.
Speaking of infrastructure, it is launching this service on the Polygon blockchain. Polygon basically “sits on top” of Ethereum, but it enables much cheaper transactions. That’s the key to making it all go, especially for smaller payments and even micro-transactions like tips.
And there’s a bigger play here…
Once its blockchain infrastructure is in place, Stripe will be able to roll out cryptocurrency payments on a global basis. This enables cheap cross-border transactions of any kind.
That could make companies like Western Union and Money Gram completely obsolete.
So there’s a big shift about to happen in the blockchain and crypto space… and that means there’s also big opportunity.
As subscribers of Unchained Profits know, I’ll help my readers find the best options for taking advantage of the coming changes. If the impact is as significant as I believe, we could see fortunes made by those who are prepared…
Simply go right here for more information on how to join us.
And the meantime, I’ll continue to keep readers updated on this story in the pages of The Bleeding Edge…
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
